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Asia experienced a major turnaround in risk sentiment after the Turkish Lira and Chinese Yuan resumed its recent declines, triggered a wave of risk-aversion across the financial markets. The US dollar regained poise versus its main rivals and reached the highest levels since June 2017 just under the 97 handle.

As a result, most majors came under renewed selling pressure, with the EUR/USD pair hitting fresh thirteen-month lows at 1.1320. However, the Aussie was the biggest loser, having faced a double whammy from the sell-off in Yuan and copper prices. The safe-haven Yen managed to limit the downside and held steady near 111.25 region, underpinned by negative Asian equities and Treasury yields. Meanwhile, gold prices also dropped further towards the $ 1190 mark amid an increased demand for dollars.

Main topics in Asia

Canada considering steel safeguard against US tariffs – Reuters

HKMA bought HKD 2.16 billion to support its currency

TRY put option value remains near record highs

Australian Wage Price Index prints at expectations, ticks to 0.6%

BoJ maintains the amounts of Japanese Government Bond buying operation today

China Commerce Ministry: US solar tariffs violate trade rules, lodges WTO complaint

USD/RUB Technical Analysis: Short-term bearish reversal confirmed

PBOC injects liquidity via 1-year MLF today

Turkey raises tariffs on some US imports – Official Gazette

Turkey’s Oktay: Tariffs raised in response to deliberate attacks on the economy by the US

Key Focus ahead

Heading into Europe, thin trading is likely to persist, as the Italian and French markets are closed in observance of Assumption Day. The traders, however, may seek fresh trading impetus from the UK consumer price index (CPI) and producers’ price index (PPI) slated for release at 0830 GMT.   The UK CPI is expected to inch higher to 2.5% y/y in July while the core figures are likely to hold steady at 1.9% in the reported month. Meanwhile, the EU docket remains data-empty.

In the NA session, the US sees the critical retail sales figures that will drop in at 1230 GMT alongside the regional manufacturing index release. Also, of note remains the US industrial production data and EIA crude inventories report for the NA traders. Besides, the ECB Governing Council member Jens Weidmann is due to speak at 1600 GMT.

EUR/USD: Under pressure as CNY hit new trend low, RSI reporting oversold conditions

The  EUR/USD  fell to 13-month low of 1.1320, bolstering the already bearish technical setup: the common currency suffered a pennant breakdown earlier this month and closed yesterday below the all-important 200-week moving average support of 1.1356. Hence, it seems safe to say the bears are in control and the EUR could soon drop to 1.13.

GBP/USD tests below 1.27 ahead of UK CPI, US Retail Sales

Today at 08:30 GMT will see the UK’s latest CPI reading, and markets are expecting a slight improvement to 2.5% for the year into June, versus the previous reading came in at 2.4%.

UK CPI Preview: Only inflation in 1-year time from now is important

The UK inflation is expected to accelerate slightly to 2.5% y/y in July while core inflation is set to remain steady at 1.9% y/y.

How to trade the UK CPI with GBP/USD

UK inflation is closely watched by the BOE and moves the British Pound. The Market Impact Tool shows trading opportunities in both upside and downside surprises on this event.

How to trade the US Retail Sales with EUR/USD

US Retail Sales and especially the Control Group component move the US Dollar. The Market Impact Tool shows trading opportunities in both upside and downside surprises on this event.